High inflation in the EU area and geopolitical uncertainties are some reasons why Europeans move assets to Switzerland. Yet as the country drifts further away from Brussels, going after these clients could become more complicated.
Swiss banks are not allowed to proactively solicit clients in Europe unless they have a branch in the respective market.
However, for many institutions, such as private banks and independent wealth managers, a second branch in Italy or France is, economically speaking, not worthwhile and does not fit with the business models of these institutions.
The EU countries who have adopted this protectionist stance, do so in favor of their own banks. By contrast, Germany has made a special concession, allowing banks from third countries – such as Switzerland – a so-called exemption.
The condition for this deal is that financial institutions adhere to certain regulations and are well supervised in their home country. It is precisely this special arrangement, of key importance to several Swiss private banks, that is under threat, as the Neue Zuercher Zeitung.
The reason being that the EU wants to further harmonize its banking supervision. So far, only Europe’s large financial houses are monitored uniformly, while smaller houses are subject to national supervision; this explains the different practices in Germany and Italy, for example, with regard to banks from third countries.
The EU project is now aimed at standardization, which would ban special regulations for individual countries. The driving force behind this development is France, which is primarily against the predominance of Anglo-Saxon banks on its own turf.
Although Switzerland plays only a secondary role in the French market, if such a procedure is rolled out in other countries, it would be a harsh verdict for many Swiss private banks.
After all, business with German clients is still lucrative and growing strongly. Estimates by the international consulting firm Boston Consulting Group (BCG) suggest that clients from the EU region and Great Britain have a good 1,000 billion Swiss francs managed by Swiss financial institutions, which employs 20,000 people at local banks and generates tax revenues of around 1.5 billion francs, as the Swiss Bankers Association (SBA) recently calculated.
The prospect of Switzerland obtaining an exclusive arrangement with the EU is also unlikely. Ultimately, any agreement depends on political willingness within the EU and after Switzerland broke off its discussions to forge an over-arching treaty the EU last year, this willingness is not great.
Although Germany, Spain and Holland were successful in getting France to omit article 21c – which is responsible for stifling foreign banks – from the plan, observers agree that sooner or later the Paris-based European Banking Authority will bring it back to the agenda.